How to Read a Credit Report

How to Read a Credit Report

Your credit report contains a large amount of information about your financial life and payment history. If you have credit cards or loans, for instance, those accounts and how you pay them are included in your credit report.

Credit reports are created by three national credit reporting agencies: Equifax, TransUnion, and Experian. Credit card issuers and lenders can pull these reports and review them in order to determine your creditworthiness.

These reports can also be accessed by consumers (like you). The Fair Credit Reporting Act requires each of the credit reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. In response to the coronavirus pandemic, however, you can now get a free credit report weekly through April 2022.

It can be a good idea to request your credit reports using Annual Credit Report.com at least once a year. This can help you ensure that the information is used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.

Unfortunately, reading your credit reports can sometimes be confusing, especially if it’s the first time. Below, we explain how to read a credit report, as well as common credit report errors to look out for.

Recommended: hard credit inquiry. This is when a business will access your credit report to make decisions about your creditworthiness.

Hard credit inquiries will appear on your credit report, so you should recognize any credit inquiries that appear.

They may also subtly affect your credit score. Multiple inquiries in a short period of time may signify to lenders that you’re seeking multiple loans, which may bring up concerns about your financial stability.

However, your credit score will not be impacted when you request a copy of your own credit report.

Reading Your Credit Report

When you get your credit reports, it’s a good idea to closely read each section. These sections typically include:

Personally Identifiable Information (PII)

This section of the report is used to identify you. It contains basic information like your name, address, and place of employment. You may also find previous addresses and employer history.

Your current and previous salaries will not be included though. Also, your employment history doesn’t affect your credit score. It’s included on your credit report only to verify your identity.

When scanning this area you’ll want to make sure that your name, address, and employer match up. Any incorrect or unfamiliar personally identifiable information (like company names you don’t recognize or employers you never worked for) may be a sign of identity fraud.

Credit Summary

This section summarizes information about the different types of accounts you have, including credit cards and lines of credit, mortgages and other loans, and any accounts that have been sent to collections.

For each account, it will include the date opened, balance, highest balance, credit limit or loan amount, payment status, and payment history.

As you read this section, you’ll want to make sure that all the information looks familiar. It’s not unusual for a credit report to have slightly dated information, such as a higher balance because you just paid off a bill this month, but all information should seem recognizable. In particular, you’re looking for:

•   Unfamiliar accounts
•   Late payments that do not align with your records
•   Balances that do not match your records

Public Records

The information in this section is pulled from public records and may include debt collections or bankruptcy information.

If you have any debt collections and bankruptcy on your record, it’s important to remember that they aren’t permanent and there’s a statute of limitations that the information is on your credit report.

•   Chapter 13 bankruptcy — deleted from your credit report seven years after filing date.
•   Chapter 7 bankruptcy — deleted from your credit report ten years after filing date.
•   Late payments — deleted from your credit report seven years after they occur.
•   Payment defaults — deleted from your credit report seven years after they occur.

If you see information that’s not familiar, you’ll want to flag it, since this could be a sign of identity theft. You may also want to flag any information that is still on your credit report after the statute of limitations has expired.

Credit Inquiries

Credit inquiries list all parties who have accessed your credit report within the past two years.

Credit inquiries can be a red flag for identity theft, so it’s a good idea to make sure you recognize any recent credit inquiries. These could be from lines of credit you opened, such as applying for a credit card, or from applying for a loan.

What To Do If You Find Errors on Your Credit Report

None of the information on your credit report should look unfamiliar. One of the main reasons why you want to read your credit report is to make sure that your credit report matches your records.

But sometimes there can be discrepancies. If you detect an error on your report, such as a payment incorrectly reported as late, you’ll want to file a formal dispute with the credit reporting company, as well as the entity that provided the information (such as a credit card company)

When writing a dispute letter, you’ll want to include:

•   A clear explanation of what is wrong in the credit report.
•   Supporting documentation showing that the information is inaccurate (such as a copy of a paid bill).
•   Request for the information to be fixed.

By law, the credit reporting company must investigate your dispute and notify you of their findings.

If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus.

The FTC’s tool can help users create a recovery plan and figure out the next steps, which may include placing a security freeze on your accounts.

The Takeaway

It’s easy and free to gain access to your credit reports from the three major bureaus. Taking advantage of this service can help you maintain good credit, and good overall financial health.

Reviewing your credit report can give you a chance to correct any errors and make sure your credit report is an accurate representation of your financial situation. It can also alert you to any fraudulent activity.

In addition, reading your credit report can help you understand how creditors see you as a borrower and cue you into any potentially problematic information that may manifest into a lower credit score than you would like.

For example, if you have high utilization (the amount of debt you carry) across your cards, it may be beneficial to focus on paying down some of your debt.

Managing your money carefully and paying all of your bills on time can also help you protect your credit.

If you’re looking to take better control of your finances, SoFi Money® can be a good place to start.

SoFi Money is a cash management account that allows you to track your spending right in your mobile dashboard, and makes paying bills easy with electronic bill pay.

Learn how SoFi Money can help you manage your finances.



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